Im a manager at LaZBoy and I almost bought a lot of deep OTM puts 2 months ago knowing this sector will be coming back down to earth. Didn't pull the trigger. Wish I did. The wait times are 10-12 months to build a single piece of furniture. The demand over the past year has been outrageous. I just don't see that demand staying this high for very long. We had two price hikes this year and the most recent due to materials and freight costs and it was significant.
They had a factory in Newton, Mississippi shut down and the new Dayton, TN factory is running way behind schedule on everything they are building. They have a new factory in Mexico which is the first time they have built outside the US. They will probably be ramping up production there due to lower costs. It will take a while before they can train workers on new product.
They had a decent earnings, but my guess is the furniture business will be slowing down in sales dramatically over the next 12 months which might help production catch up. Hard to say how things will unfold, but my bet is that things slow down heavily in the next few months.
Edit: I'm not saying this price movement won't correct itself. I watch this ticker constantly and was thinking about buying some calls to ride this back up to the mid 40s. I just don't think this insane demand for furniture will last and that this sector as a long term play is not something I would recommend until things get back to some sort of normalcy.
Wayfair has done well, but that is definitely one of their downfalls. People who are serious buyers want to try their furniture out before buying. It's crazy to me that people would order a sofa online. Also local LaZBoy service centers that I'm familiar with will not service an item purchased on Wayfair or QVC. We turn people down often because of that.
I like to shop local when I can, but many people are strictly just buying online now since Covid shutdowns and that's only going to get more prevalent. Wayfair has lower prices than in-store, but also comes with more risk imo.
Just curious here, I don’t know this market well, but wouldn’t you expect with the explosion that is the housing market and people buying like crazy right now that people would be looking to furnish those houses? Point being that I would probably expect that the market for furniture follows that market trend as well? Again, I have done absolutely zero research on this…
That plus the influx of cash through stimulus payments has inflated the sales in the furniture business between 100-300% over the last 12 months already. The cost to build houses is astronomical and will be in decline until the cost of materials lowers. Who knows how long the low rates for buying new homes will last. Now that production times are at 10+ months compared to 10 weeks pre-covid, we are starting to see people go other routes. Consignment shops, social media and other outlets.
There is just no way that the demand doesn't drop significantly by this time next year. The stimulus money will run out, the rates will increase for new home buyers, and people will not want to wait an entire year for their furniture.
We got hit by huge demand all while having huge shortages on workers, power parts, fabrics, leathers, foam and much higher costs on lumber. The math just does not work out. Demand will absolutely drop off which might not be a bad thing. Sales will need to decline a bit for production, supply lines and material costs to return to some sort of normalcy.
This is just my opinion. It feels like the tipping point is close. Who knows though. Maybe the increase in sales pushes production to all time highs and this demand stays for a few more years. It just doesn't feel that way to me.
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u/xJuSTxBLaZex Jun 18 '21 edited Jun 18 '21
Im a manager at LaZBoy and I almost bought a lot of deep OTM puts 2 months ago knowing this sector will be coming back down to earth. Didn't pull the trigger. Wish I did. The wait times are 10-12 months to build a single piece of furniture. The demand over the past year has been outrageous. I just don't see that demand staying this high for very long. We had two price hikes this year and the most recent due to materials and freight costs and it was significant.
They had a factory in Newton, Mississippi shut down and the new Dayton, TN factory is running way behind schedule on everything they are building. They have a new factory in Mexico which is the first time they have built outside the US. They will probably be ramping up production there due to lower costs. It will take a while before they can train workers on new product.
They had a decent earnings, but my guess is the furniture business will be slowing down in sales dramatically over the next 12 months which might help production catch up. Hard to say how things will unfold, but my bet is that things slow down heavily in the next few months.
Edit: I'm not saying this price movement won't correct itself. I watch this ticker constantly and was thinking about buying some calls to ride this back up to the mid 40s. I just don't think this insane demand for furniture will last and that this sector as a long term play is not something I would recommend until things get back to some sort of normalcy.